4.1 Homeowners Forms HO-2 through HO-8 and Eligibility

The ISO Homeowners Program

The modern homeowners (HO) policy is a package policy that bundles property coverage (Section I) and personal liability coverage (Section II) into a single contract. Nearly every state uses forms filed by the Insurance Services Office (ISO), and licensing exams test the ISO form numbers and the editions in current use. The most widely adopted editions are HO 2011 and the earlier HO 2000; exam questions generally describe coverage as it appears in these editions, so memorize the form numbers and what each one covers.

The package approach is mandatory: an insured cannot buy Section II alone under the HO program, and Section I coverage is also automatically packaged. Eligibility, not preference, determines which form an applicant receives.

The Six Homeowners Forms

Five forms cover owner-occupants of dwellings; one covers tenants and one covers unit-owners (condos). The trap many candidates fall into is confusing the perils basis (named vs. open) and which forms still exist.

Forms at a Glance

Note there is no HO-1 and no HO-7 in the current ISO program. HO-1 (Basic Form) was withdrawn in most states decades ago. Exams frequently list HO-1 or HO-7 as a distractor; both are wrong for current coverage.

The HO-3 vs HO-5 Distinction

• HO-3 insures the dwelling and other structures on an open-perils basis but covers personal property on a named-perils basis. This split is the single most-tested fact in the HO forms.
• HO-5 extends open perils to personal property too, giving the broadest coverage. It is the premium owner form.
• HO-2 is named perils on everything (dwelling and contents).

Eligibility Rules

Eligibility limits who may purchase each form:

• The dwelling must be used principally for private residential purposes. Incidental occupancies (a home office, a small studio) are permitted.
• The dwelling may contain no more than four families and no more than two roomers or boarders per family to remain HO-eligible. A five-unit building must use a dwelling fire (DP) or commercial program instead.
• HO-4 (Renters) requires the named insured to be a tenant; it provides Coverage C (personal property) and Section II liability but no Coverage A. Tenant improvements get a small built-in limit (commonly 10% of Coverage C).
• HO-6 (Condo) is for unit-owners. Coverage A is limited (often a $5,000 default for building items the owner is responsible for — alterations, appliances, fixtures) and can be increased by endorsement. The association's master policy covers the building shell.
• HO-8 (Modified) exists because older homes may have a replacement cost far above market value. HO-8 settles dwelling losses on a modified / functional replacement cost or ACV basis and uses a reduced named-perils list, preventing the moral hazard of over-insuring a home worth less than it would cost to rebuild with original materials.

Perils Basis Summary by Form

A fast way to lock in the forms is to memorize the perils basis for the dwelling versus the contents:

The only forms giving open-peril contents coverage are HO-5 by default and HO-3 with the HO 00 15 (Special Personal Property) endorsement, which upgrades HO-3 contents to open-peril. That endorsement is the bridge exam writers use to convert an HO-3 into HO-5-equivalent coverage.

Why Eligibility Drives the Sale

Producers cannot simply offer the broadest form to every applicant. A four-plex with the owner living in one unit is HO-eligible; a five-unit building is not and must go to a dwelling-fire or commercial policy. A tenant cannot buy Coverage A, so a renter who wants building coverage on improvements relies on the small tenant-improvements allowance inside HO-4.

A condo owner's exposure depends on the master policy type — a bare-walls association policy leaves far more for the HO-6 unit-owner to insure than an all-in master policy, so the producer must read the association documents before setting the HO-6 Coverage A limit. These eligibility and coordination facts are tested as scenario questions, not just definitions.

Form Editions and Exam Currency

When a question references a form, assume the current ISO edition unless told otherwise. The HO 2011 program made the named-peril contents lists slightly broader and clarified mold and ordinance limitations; older HO 2000 wording is occasionally cited but rarely changes the correct answer at the licensing level. Focus your memory on the structural facts — package mandate, six forms, open versus named basis, and the four-family/two-boarder eligibility ceiling — because those are stable across editions.